Unity Software Inc.
Communication Services · Interactive Media & Services
Structural read: Unity sits on the largest real-time 3D install base in software (~70% mobile share, dominant cross-platform tooling) but monetization is broken - the 2023 Runtime Fee blew up developer trust, ironSource integration underdelivered, and ad-tech share leaked to $APP and $TTD.
Thesis is binary turnaround under Bromberg: if Vector (the rebuilt ML ad engine) closes the gap to $APP AppLovin AXON and engine pricing holds without churn, the install base re-rates as a platform. If Vector lags two more quarters, Grow continues to bleed and Create alone does not justify multiple.
- Vector rollout (2025) showing iOS install-per-mille uplifts in early cohorts; closes structural gap to $APP
- ~70% mobile engine share is a moat ad-tech competitors cannot replicate
- Industrial / non-gaming 3D (auto HMI, AEC digital twins) is a real second leg with $HON, Mercedes wins
- Vision Pro / visionOS makes Unity the default AR/VR runtime; spatial compute optionality is free
- Bromberg cost cuts took opex down ~25% YoY; operating leverage is steep on any Grow recovery
- Grow Solutions revenue down YoY for 6+ quarters; $APP keeps taking share with no signs of pause
- Runtime Fee scar tissue means engine pricing power is structurally capped - devs are evaluating Godot, Unreal
- Industrial 3D is talked-up but small (<5% revenue), not material near-term
- AR/VR optionality requires Vision Pro to actually scale; $AAPL has not signaled volume ramp
- Stock-based comp dilution still ~8-10% of revenue; cash gen flatters non-GAAP only
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